Richard Cleland* Assistant Director Division of Advertising Practices Federal Trade Commission

May 5, 2017 2017 FDLI Annual Conference Richard Cleland* Assistant Director Division of Advertising Practices Federal Trade Commission * Mr. Cleland s statements reflect his own views, and do not necessarily reflect the views of the Commission or any individual Commissioner.

December 22, 2015 the Commission issued an enforcement policy statement addressing the issue of native advertising. https://www.ftc.gov/system/files/documents/public_statements/896923/151 222deceptiveenforcement.pdf Native advertising is advertising that is intended to mimic non-advertising content in style and form. Native Advertising: A Guide for Businesses https://www.ftc.gov/tips-advice/business-center/guidance/native-advertisingguide-businesses

The Commission will find an advertisement deceptive if the ad misleads consumers as to its nature or source, including that a party other than the sponsoring advertiser is its source. Misleading representations of this kind are likely to affect consumers decisions or conduct regarding the advertised product or the advertisement, including causing consumers to give greater credence to advertising claims or to interact with advertising content with which they otherwise would not have interacted.

If it is apparent from the context that the content is an ad: Run Fast, Run Smart, Run Winged Mercury If there is no selling message: The 20 Most Beautiful Places to Vacation Winged Mercury Brand Presented by Winged Mercury

Use clear and unambiguous language. Place disclosures as close to the native ads as possible. Use a font and color that s easy to read. Use a shade that standouts against the background. Video ads insure that disclosure is on the screen long enough to be noticed, read, and understood. Audio disclosures read at a cadence that s easy for consumers to follow and in words consumers can understand.

Place disclosures on the main page of a publisher site where consumers will notice them and easily identify the content to which the disclosure applies. Place disclosures in front of or above the headline of the native ad. If a native ad s focal point is an image or graphic, ad disclosure might need to appear directly on the focal point itself.

A single disclosure that relates to more than one native ad should be accompanied by visual cues that make it clear the disclosure applies to each ad in the grouping. Disclosures should remain when native ads are republished by others.

Once consumers arrive on the click- or tap-into page where the complete native ad appears, disclosures should be placed as close as possble to where they will look first. In multimedia ads, a disclosure should be delivered to consumers before they receive the advertising message to which it relates.

Ad, Advertisement, Paid Advertisement, Sponsored Advertising Content

Ambiguous Promoted Promoted stories Not clear Presented by Brought to You by Promoted by Sponsored by

www.ftc.gov/news-events/press-releases/2016/03/lord-taylorsettles-ftc-charges-it-deceived-consumers-through Lord & Taylor s campaign promoted their Design Lab collection (March 2015). Native advertising & Influencer campaign on Instagram. Paisley asymmetrical dress.

Lord & Taylor contracted Nylon, an online fashion magazine, run an article and post a photo of the paisley dress on Nylon s Instagram page. Lord & Taylor reviewed and approved the paid-for Nylon article. Lord & Taylor reviewed and approved the paid-for post.

Lord & Taylor also recruited a team of 50 fashion influencers. Paid them between $1,000 and $4,000 to post photos of themselves in the dress on Instagram on one specified weekend in March 2015. Coordinated with Nylon postings. No disclosures.

wendyslookbook 3 weeks ago tspring awaken ng} Pairing cropped trenchwith glotdand1ay o1's exclusive hem dress 'Ci Really enjoye seeing how others styled thisvibtam piece! lesfieesue tenun_ruseni.prince se_malgres_elle and 12.3k others like his. hafizahadee Iwamthat shoesss1 Mthatsotee Im A W E S O M E * wendysundari i!tlji chloe_little_ store nafiskerondotcom wendyslookbook it was sue a pleasure to meet you today Wendy your a pure ge lets stay connected. 11 fashioninfinity12_ Ipost many omds and design r handbags pies I.la sablne_says lrs not that exdusive.ihave s en about a dozen people style this onlllstagram and many more when I looked at the hash tag_

Lord & Taylor falsely represented that the 50 Instagram images and captions reflected the independent statements of impartial fashion influencers, when they really were part of a Lord & Taylor ad campaign to promote sales of its new line; Lord & Taylor failed to disclose that the influencers were the company s paid endorsers a connection that would have been material to consumers; and Lord & Taylor falsely represented that the Nylon article and Instagram post reflected Nylon s independent opinion about the Design Lab line, when they were really paid ads.

L&T is prohibited from falsely claiming that an endorser is an independent user or ordinary consumer. Material connections must be disclosed. L&T is prohibited from falsely claiming that a statement or opinion from an independent or objective publisher or source. L&T must monitor its influencers.

Ask these questions when determining whether a disclosure is required: Could the content be interpreted as promoting the sale of a product or service? If so, is the content easily recognizable as an advertisement? If not, a disclosure will be required, unless... Does the advertising consist of only displaying a product within a movie or TV show without any accompanying performance claims? If yes, no disclosure is required. 18

Ask these questions when determining what the disclosure should say: Does the proposed disclosure clearly convey the relationship between the content and the advertiser? Is it easily understandable by ordinary viewers? If the content is aimed at a specific target audience, is the disclosure easily understandable by that audience? Are there a significant number of viewers who might not understand the proposed disclosure? 19

Ask these questions when determining whether the disclosure is conspicuous? Is the disclosure in a location that is likely to be noticed? How close is the disclosure to the native ad? Is the disclosure visible without additional clicks or significant scrolling? If written, is the disclosure easy to read based on font, color, size, and contrast? For video ads, is the disclosure on the screen long enough to be read and understood? For audio disclosures, is the disclosure read at a cadence that is easy for consumers to follow? Is the disclosure viewable on mobile and desktop platforms? 20

Richard Cleland Assistant Director Division of Advertising Practices Federal Trade Commission Washington, D.C. Phone: 202-326-3088 Email: rcleland@ftc.gov

When Is a Native Ad Truly a Native Ad? By Linda Goldstein lgoldstein@bakerlaw.com

When Are the Disclosures Required?

Ad or Not? 24

Is It An Ad Not all sponsored/branded content is an ad Factors to Consider: Does the content mention or show the advertiser s product or service Could a selling message be implied Does the content help to promote the product or service 25

Ad or Not? FTC Example: Featured article in Fitness Magazine about the 20 most beautiful places to travel Article paid for by Winged Mercury Footwear Article says Presented by No product mentioned or promoted in the article Article does not have to be labeled as an AD

Ad or Not? FTC Example: Winged Mercury disseminates an article on Fitness Magazine Headline reads Running Gear Up Mistakes to Avoid Article features training suggestions AND recommends Winged Mercury Shoes for injury prevention Article can be accessed from Fitness Life main page or directly Disclosure is required on main page of Fitness Life s site Disclosure is required on click into page

Ad or Not? FTC Example: Virtual game integrates branded products into the game Advertisers pay for the brand integration No objective claims are made about the product FTC View: Not material to consumers whether branded products appear in the game because the advertiser paid for the integration or the game developer used their own judgment No disclosure is required RELY ON THIS CASE WITH CAUTION!

Ad or Not? Disclosure Implications: If its sponsored or branded content - but not an ad- more leeway with disclosures Sponsored/Presented/Promoted would be OK Do not label it an ad if its not Third party rights implications 35

Clear Its an Ad? 36

When Is It Clear It s an Ad? Factors to Consider: How similar is the format to other non-advertising content on the page To what extent is the native ad distinguished from advertising content Is there other branding FTC will look at overall net impression Context is Key

When Is It Clear It s an Ad?/ When Is Disclosure Required? FTC Example: Article placed by Winged Mercury appears on financial news site Format, color scheme, font and graphics resemble other financial news articles Headline reads Run Fast, Run Smart, Run Mercury Image of shoe appears in the article Article contains a hyperlink to click to learn more about Mercury Shoes FTC View: Headline, shoe image, hyperlink convey commercial nature of the content

When Is It Clear It s an Ad? FTC Example: Online magazine featuring stories about health, technology, science Headline reads Making Cleaning Fun, How Technology Has Changed Housekeeping Text and image formatted like other articles in the magazine s feed Article featured Dirt Pulverizer vacuum as innovation Advertiser paid the publisher to create and publish the article FTC View: Disclosure required on the publisher s site and on the click into page

71% Identified as an Article 71% Identified as an Article71% Identified as an Article

SlimFast in Star Magazine NAD Case #6039 Native ads promoting SlimFast appeared on cover and in an article in the magazine Cover and internal ad were designed to look like editorial,.

SlimFast in Star Magazine NAD Case #6039 The cover page referred readers to an article titled, Snack Your Way to Slim. This cover story and article appeared to be editorial content but were in fact advertisements for SlimFast. NAD Second article promoted shakes with product claims provided by SlimFast- clinically proven to lose weight

Ad or Not? SlimFast in Star Magazine NAD Case #6039 The NAD ruled that: [A]dvertising in a format that appears to be editorial has the potential to misled or confuse consumers because consumers may attach a different weight or significance to editorial content than to pure advertising content. In response to the NAD s inquiry, SlimFast discontinued the ads. 44

Ad or Not? SlimFast in Star Magazine NAD Case #6039 This is the first time we looked at a publisher and asked them to come in and discuss the way they were presenting a native ad in their magazine for a product that was not their own. Laura Brett, NAD

SEC Steps Into the Action 46

If a disclosure is needed, where does it belong?

Example 1: Embedded Video on Lifestyle Website Lifestyle website with articles and videos. On a page that discusses the season s newest beauty products, there is a link to a tutorial video about lipstick application. Stylist shows several techniques and then recommends the brand, Diva Luxe, which paid for and produced the video. Disclosure prior to playing the video would be required. Depending on the length and content, an on-screen or disclosure within the video may also be recommended.

Example 2: Social Media Feed Love this new shade for spring! - Same video as before. - Posted by the stylist. - Two potential advertisers here: Robin (stylist) and Diva Luxe (lipstick) - Post disclosure typically provided by the platform - Video disclosure would need to also disclose that the video is sponsored because it could otherwise appear to be Robin s opinion rather than commercial content.

Example 3: Multimedia Electronic Magazine - Video takes you to a cooking demonstration in which a chef explains how to prepare the meal shown here. - He discusses how delicious it is, how he likes to serve it for friends and family. - Video was sponsored by the National Artichoke Council. - Disclosure necessary in on the magazine display and in the video to prevent deception.

Example 4: Widgets You may also like - The same site also features content recommendation widgets that appear to be recommended recipes based on your search history. - Some are just recipes but some are sponsored content. - Disclosure is necessary before consumers click as to which ones are sponsored.

Key Considerations Communicate the sponsored nature before consumers view the ad. Multiple disclosures may be necessary depending on context, e.g., on the social media post and in the video or on the magazine and in the multimedia feature. Close proximity Clear and conspicuous on all platforms.

Reed Smith LLP Native Advertising What does the disclosure need to say?

Native Advertising Reed Smith LLP

Native Advertising ForbesBrandVoice: Connecting marketers to the Forbes audience. What is this? Reed Smith LLP

Native Advertising Reed Smith LLP

Native Advertising Nylon Magazine Website Reed Smith LLP

Lessons Learned Native advertising content must be disclosed Disclosures must follow republication of content Disclosure must be presented before advertising message Mandate disclosure in your agreements! Reed Smith LLP